Italy is having a bad week. Brussels is breathing down its neck for possibly fudging figures to appear in line with EU regulations. If that was not enough, it could soon see its fabulously rich prime minister convicted for corruption.

Italy has been sailing close to the wind for a while now, batting off warnings that its budget deficit is creeping dangerously close to the 'ceiling' of 3 percent of GDP set by the EU stability and growth pact. Now, it seems, Italy may have been borrowing much more than its officially declared deficit figures suggest, meaning it has effectively been breaking the EU rules in the hope no one would notice.

This week a European Commission report said Italy may have estimated deficits lower than the actual figure every year from 1997 to 2003. For example, up to 4.3 percent of Italy's GDP may have been borrowed in 2001, and 4.1 percent in 2003.

"The magnitude of the inconsistency has reached levels which are difficult to justify as mere statistical discrepancies," the report said, but added "no final conclusions have been reached so far".

The report came just weeks after the EU decided to take legal action against Greece for allegedly misreporting its deficit figures in the years before the launch of the euro in 1999.

A commission involving Italy's national statistics office, the Bank of Italy and the Treasury was set up in 2002 to investigate the growing gap, but so far the commission's conclusions have not been published.

"I am not expecting a big revision of Italian figures," said the EU monetary affairs commissioner, Joaquin Almunia, at a meeting of finance ministers in Brussels this week. But the commissioner said he was expecting further clarifications from Rome on some "technical niceties".

Everybody played down the likelihood that Italy, which has the second largest debt in Europe after Greece, could be as devious in its bookkeeping as Greece appears to have been.

"There are no concrete indications that there have been any misreporting on facts from Italy," said the Dutch finance minister, Gerrit Zalm, who chaired the Brussels meeting.

"The vast majority of the difference has been tracked down," Italy's finance ministry said in a statement.

"Sizeable" discrepancies in 2001 and 2002 were largely due to the way Italy accounted for public deposits in Post Office savings accounts, it said.

The fears about Italy's deficit come as the prime minister, Silvio Berlusconi, has just pushed through a 6.5bn euro tax cut in the country's 2005 budget, designed to cheer up Italians and help kickstart the country's floundering economy.

The 2005 budget also includes public spending cuts worth 24bn euros, but Brussels is concerned the tax cuts could nevertheless push Italy's deficit over the 3 percent limit next year. From Berlusconi's point of view though, tax cuts were a vital move to win over Italian voters in time for general elections in 2006. Italians are struggling to pay their bills and have seen no signs of the economic miracle the billionaire businessman promised last time they elected him.

As if his country's financial troubles are not enough to keep him busy, Berlusconi could be found guilty by a Milan court, as early as tonight, of bribing judges to prevent the sale of a state-owned food chain, SME, to another businessman in the 1980s.

Prosecutors have requested an eight-year prison sentence for Berlusconi, who has always denied the charges, claiming he is the victim of a vendetta by left-wing magistrates. The Milan court has already found Mr Berlusconi's friend and former lawyer, Cesare Previti, guilty of the same charges and sentenced him to five years' jail.